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Antiguan newspaper slams PM Gaston Browne over Sandals

Tuesday, November 07, 2017

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The following editorial appeared yesterday in Antigua's Observer newspaper, commenting on the sustained attacks against Sandals Antigua and its owner Gordon “Butch” Stewart by the prime minister, Gaston Browne.

Following is the full text of the editorial:

We wonder who in the camps of the Government of Antigua and Barbuda and/or Sandals Resorts International (SRI) thinks that this public spat between the two entities is good for business?

Recently, Prime Minister Gaston Browne appeared on Cliff Hughes' Nationwide Radio show in Jamaica and lambasted the Sandals organisation, its founder Gordon “Butch” Stewart, and the hotel industry as a whole. The radio interview, which began with light talk about our 36th anniversary of Independence, was to focus on the ouster of former Minister of Tourism Asot Michael but quickly turned to the Sandals saga.

Just as the radio host was anxious about the prime minister's allegations and interrupted him many times to protect the interest of his station, we, too, are anxious of very strong allegations made by the prime minister, so we will not be repeating them here.

What we find fascinating in all of this is the lack of common ground. The prime minister's argument that the hotels extract enormous concessions and play the Caribbean destinations off against one another is not something that any one will argue against. He stands on firm ground there; however, the divide-and-conquer strategy is just part of doing business and has been at play around the world in all aspects of the tourism and other industries forever.

For example, in 2005, Ross A Klein, PhD, of the Canadian Centre for Policy Alternatives, wrote almost those exact words in a paper, entitled 'PLAYING OFF THE PORTS – BC and the Cruise Tourism Industry'. He wrote: “…without a coordinated and intelligent plan, ports risk being played off one another — a common scenario in the Caribbean and Mediterranean.”

The question is: What do we do to achieve a harmonious existence where there is an equitable distribution of wealth and a fair and level playing field for all the players in the industry? So, while the prime minister may be fighting the good fight from a (high-level point of view) and asking for more from Sandals, it does not help that he has given away the farm to the likes of YIDA.

It irks more than a few, including Sandals, that the concessions that they benefit from are time-limited agreements while YIDA's concessions are enshrined in law and are forever, or until the Government decides to revoke the law.

In any case, it is worth reviewing the two briefly to see how difficult it is to reconcile the arguments. On one hand , you have Sandals, a company which we can all admit has a proven track record of investment and performance in our bit of paradise. The specific concessions that are the topic of public debate were outlined in a January 20, 2009 letter from the then Minister of Finance and Economy Dr Errol Cort and detailed the Cabinet's decision regarding the Antigua and Barbuda Sales Tax.

In that document the tax rates were as follows: No discount on the 10.5 per cent rate for the existing hotels and a sliding rate, based on time, for new construction.

Specifically, from July 5, 2007 to December 31, 2014, “The tax rate in effect (currently 10.5 per cent) x gross revenue less the following deductions: travel agents' commissions, advertising, water sports, entertainment x 32 per cent. From January 1, 2015 to June, 30 2022, the percentage multiplier increases to 40 per cent, and from July 1, 2022, the discounts are discontinued.”

In summary, the concessions on the “extension” to the hotel were for a period of 15 years and then came to an end.

If we were to compare that to the YIDA and their concessions, they would pale in comparison. First, YIDA is a relatively unknown entity. They have no history of commercial performance in Antigua and Barbuda and have only made promises. For those promises, we have waived pretty much everything and have enshrined those concessions into law with no end.

In the Antigua and Barbuda Special Economic Zone (YIDA International Investment Antigua Limited) Licence Order, 2015 Statutory Instrument, 2015 No 53, the YIDA tax concessions are summed up under the heading 'Financial and Tax Policies'.

The very first row of that table states: “The zone shall be free of all taxes levied in Antigua and Barbuda.” All! So forget discounts on taxes, as in the Sandals case. YIDA will pay none. No Customs duties or import taxes, no corporate sales taxes, no personal income taxes, no sales taxes, no value added taxes, no capital gains taxes, no… well, you get the idea.

Not only that, the law states: “In the event any new concessions are awarded to other parties for investment in Antigua and Barbuda, all projects of the zone shall equally be entitled to enjoy the same incentives and concessions.”

Further, “The License awarded to YIDA and all its incentives and concessions shall be protected during the life of the zone.” Oh, and let's not forget the exclusivity, because “The approved names and categories of functional businesses and industries operating in the zone shall be protected and such approved names and categories shall not be accepted for approval for any other applicants.”

So while the prime minister goes on Jamaican radio and all over the world to question the “ruthless behaviour” of corporate entities, and while he talks about what is wrong with the current concession model saying, “It cannot be exclusively about maximising shareholder profits, to the detriment of stakeholders,” he negates his argument by perpetuating the same concession model that he rails against to an extreme degree with YIDA.

It is easy to stand on the right side of an argument against extreme concessions in developing nations, but not so easy when you also argue for the need for extreme concessions for the development for larger nations.

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